U.S. Insurer Allstate to Acquire National General for $4 Billion in Cash

Allstate Corporation, the largest publicly held personal lines property and casualty insurer in America, has announced the acquisition of National General Holdings Corp for approximately $4 billion in cash, or $34.50 per share, expanding its auto insurance business amid the COVID-19 pandemic.

Allstate, which is also one of the largest U.S. auto insurers, said the National General shareholders will receive $32.00 per share in cash, including dividends anticipated to be $2.50 per share, providing $34.50 in total value per share. The auto insurer will also fund the share purchase by deploying $2.2 billion in combined cash resources and, subject to market conditions, issuing $1.5 billion of new senior debt.

National General’s board of directors has approved the transaction, which includes customary terms and conditions, including a breakup fee of $132.5 million. A voting agreement has also been signed with entities controlling 40% of National General’s common shares to vote for the transaction, the company added.

The above-mentioned offering is expected to close in 2021.

Ardea Partners LP was the exclusive financial adviser to Allstate, and Willkie Farr & Gallagher LLP was the company’s legal adviser. J.P. Morgan Securities LLC was the exclusive financial adviser to National General, and Paul, Weiss, Rifkind, Wharton & Garrison LLP was National General’s legal counsel.

Executives’ comments

“Acquiring National General accelerates Allstate’s strategy to increase market share in personal property-liability and significantly expands our independent agent distribution,” Tom Wilson, Chair, President and CEO of the Allstate Corporation said in a press release.

“The acquisition increases personal lines premiums by $4.0 billion and market share by over 1 percentage point to 10%. National General’s business and technology platforms will be utilized to further strengthen Allstate’s existing independent agent businesses. The transaction will be accretive to adjusted net income earnings per share and return on equity beginning in the first year.”

“National General’s operating expertise has enabled us to serve customers and independent agents well as we have grown both organically and through acquisition,” Barry Karfunkel, Co-Chairman and CEO of National General said in a press release.

“We are excited about combining our team’s expertise and commitment with Allstate to become a top-five personal lines carrier for independent agents while offering a broader array of products. National General’s shareholders are also benefiting by unlocking the value created over the last decade.”

Allstate price target and outlook

Eight analysts forecast the average price in 12 months at $118.86 with a high forecast of $138.00 and a low forecast of $101.00. The average price target represents a 28.29% increase from the last price of $92.65, according to Tipranks. From those eight, four analysts rated ‘Buy’, four rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley lifted their target price on shares of Allstate from $111.00 to $115.00 with a high of $136 under a bull scenario and $67 under the worst-case scenario and gave the company an “equal weight” rating. Deutsche Bank lifted their target price on shares of Allstate from $115.00 to $120.00 and gave the company a “hold” rating.

Credit Suisse Group upgraded shares of Allstate from an “underperform” rating to a “neutral” rating and lifted their target price for the company from $94.00 to $101.00 in a report on Thursday, June 25th. Piper Sandler raised the target price to $112 from $108.

Morgan Stanley’s view on the acquisition

“The acquisition of National General, given its focus on nonstandard auto coverage in the independent agency channel, is likely a surprise to investors. Recent acquisitions have focused away from the traditional personal lines space to diversify Allstate’s offerings, rendering this transaction all the more surprising. In recent years, the direct channel has taken greater share from captive agencies in personal auto than independent agencies,” Michael W. Phillips, equity analyst at Morgan Stanley noted in April.

“As such, National General provides Allstate with another method of combatting the challenge to the captive agency model, given its market share declines in recent years. Likewise, National General has presence in lender-placed homeowners insurance, which benefits during recessions. As such, entering LPI could further insulate Allstate during a downturn, making the deal incrementally more attractive given current challenges in the macro environment,” the analyst added.

Upside and Downside risks

Upside:

Auto loss trends improve further, unit growth drives top-line acceleration, continued strong share repurchase, benign cats, and interest rates rise.

Downside:

Personal auto loss costs turn higher, lack of unit growth, performance volatility, unpredictable losses from catastrophes and investments.

Google And Deutsche Bank Announce Strategic Partnership

Alphabet’s Google and Deutsche Bank have announced to form a strategic partnership to provide the German lender access to cloud services and create innovation in technology-based financial products for clients.

This deal is a part of Deutsche Bank’s plan to make targeted investments in technology and innovation, utilising a budget of 13 billion euros by 2022. Both have signed a letter of intent and plan to sign a multi-year contract within the next few months.

Deutsche Bank anticipates the partnership to earn over 1 billion euros in accumulated earnings before income and tax over the next decade, reported by Reuters, citing a familiar source.

Executives’ comments

“For more than 150 years, Deutsche Bank has been an industry pioneer, with a strong record of innovation in the financial services sector,“ Sundar Pichai, CEO of Google and Alphabet said a press release. “We’re excited about our strategic partnership and the opportunity for Google Cloud to be helpful to Deutsche Bank and its clients as they grow their business and shape the future of the financial services industry.”

“The partnership with Google Cloud will be an important driver of our strategic transformation,” Christian Sewing, CEO, Deutsche Bank said a press release. “It demonstrates our determination to invest in our technology as our future is strongly linked to successful digitization. It is as much a revenue story as it is about costs.”

Google price target

Thirty-one analysts forecast the average price in 12 months at $1,527.66 with a high of $1,800.00 and a low of $1,237.00. The average price target represents a 1.87% increase from the last price of $1,499.65, according to Tipranks. From those 31, 29 analysts rated ‘Buy’, two analysts rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley target price is $1,400 with a high of $1,725 under a bull scenario and $960 under the worst-case scenario. Alphabet had its price target boosted by Canaccord Genuity from $1,550.00 to $1,700.00 and held a ‘Buy’ rating on the information services provider’s stock.

Robert W. Baird raised the price target from $1,500.00 to $1,650.00 and Goldman Sachs Group raised to $1,775.00 from $1,425.00 with a ‘Buy’ rating. The company price objective suggests a potential upside of over 23% from the company’s current price. BofA global research raised price objective to $1,610 from $1,420 and Citigroup raised it to $1600 from $1400.

Analyst view

“Google Websites growth is likely to rebound in 2021 as we believe there are several underappreciated products driven by mobile search, strong YouTube contribution, and continued innovation, such as Maps monetization,” Brian Nowak, equity analyst at Morgan Stanley noted in April.

“Continued expense discipline leads to operating leverage and upward revisions on EPS estimates,” the analyst added.

Sirius XM to Acquire Stitcher Podcasting Unit for Nearly $300 Million

Sirius XM Holdings Inc, an American broadcasting company headquartered in New York City, is close to a deal to acquire E.W. Scripps’ Stitcher Inc. podcasting unit for nearly $300 million, the Wall Street Journal reported, citing people familiar with the matter.

The satellite radio operator is currently planning to expand into the fast-growing podcasting industry. In 2019, Sirius XM hinted to expand its business with a deal in which Walt Disney Company’s Marvel Entertainment is creating exclusive podcasts for the company’s satellite radio and streaming services, the WSJ reported.

According to the Interactive Advertising Bureau, the United States advertising revenue from podcasts climbed over 40% to $678.7 million in 2019 and it is forecast to rise to $863.4 million in 2020 and cross $1 billion next year.

After this news, Sirius XM’s share closed 0.51% higher at $5.87 on Monday, albeit putting it down around 20% since the start the year.

Sirius XM price target

Nine analysts forecast the average price in 12 months at $6.51 with a high of $7.50 and a low of $4.50. The average price target represents a 10.90% increase from the last price of $5.87, according to Tipranks. From those nine, five analysts rated ‘Buy’, three analysts rated ‘Hold’ and one rated ‘Sell’.

Morgan Stanley target price is $6.75 with a high of $8 under a bull scenario and $4.5 under the worst-case scenario. In April, Liberty Sirius XM Group Series has been assigned a consensus broker rating score of 1.25 (Strong Buy) from the two analysts that provide coverage for the stock, Zacks Investment Research reports.

One analyst has rated the stock with a buy recommendation and one has given a strong buy recommendation to the company. Wells Fargo lowered the price target to $7 from $9, RBC cuts target price to $6 from $7 and Evercore ISI cuts price target to $6.5 from $8.

Analyst view

“We believe SiriusXM has executed well in the franchise channel of the used car market, and rising penetration has helped slow trial start growth deceleration and given us more conviction in net adds. However, we see limited upside to our subscriber forecast given the difficulty of executing in the remaining used channels,” Benjamin Swinburne, equity analyst at Morgan Stanley noted in June.

“While we expect declining auto sales and an expected recession to weigh on results, we expect resilience in Sirius’ fundamentals and sub base to support EBITDA growth over the 2020-22 time frame. We see modest upside today, but believe OW Liberty Sirius (LSXMK) presents a more attractive opportunity, given its 70%+ stake in SiriusXM is valued at a 35-40% discount,” the analyst added.

We See 7% Upside to Avangrid $46 Target And 11% Total Return: Morgan Stanley

Avangrid Inc, a U.S. based diversified energy and utility company that provides clean energy, has a potential to achieve an above-average earning per share growth from utility and renewables opportunities with outlook skewed more to the upside, according to Morgan Stanley.

The second-largest provider of clean, renewable wind power in the U.S. is on the right path and on multiple issues there is an improving line of sight, but it is still too early for the stock to re-rate.

“Overall rate base growth is slower than previously planned but still robust. We estimate 9% rate base CAGR in 2019-2022 (from the original 16% range), and modest ongoing regulatory lag going forward resulting in an 8.6% earned ROE,” Morgan Stanley’s analysts wrote.

Five analysts forecast the average price in 12 months at $47.00 with a high of $48.00 and a low of $46.00. The average price target represents a 9.02% increase from the last price of $43.11. From those five, two analysts rated ‘Buy’, three analysts rated ‘Hold’ and none rated ‘Sell’, according to Tipranks

Morgan Stanley target price is $46 with a high of $58 under a bull scenario and $34 under the worst-case scenario. Walgreens Boots Alliance had its target price decreased by Mizuho from $53.00 to $48.00 and BoFA global research lowered price objective to $43 from $44.

The leading sustainable energy company will release its Q2 2020 financial results on July 21 after the market closes. In conjunction with the earnings release, it will conduct a webcast conference call with financial analysts on July 22, 2020 beginning at 10:00 AM ET.

In the long-run, there is still a solid rate base growth opportunity expectation may need to decline on the lower CAPEX outlook in the 2020-2023 period. We project Avangrid rate base will grow at a 7.5% CAGR in 2020-2023, Morgan Stanley noted.

“Avangrid has above-average EPS growth potential from utility and renewables opportunities, along with upside options not yet priced in. However, we think consistent execution and resolution of overhangs are needed before a re-rating can happen. We take a wait-and-see approach and initiate at EW with a $46 price target implying 7% upside and 11% total return considering the 4.2% yield,” noted David Arcaro, equity analyst at Morgan Stanley.

“Key risks/issues to consider: (A) risk of greater competition for renewables growth, (B) unfavourable regulatory outcomes, (C) longer-term exposure to merchant power market volatility after contracts roll-off, (D) long-term moves away from natural gas use by Northeast states, (E) major shareholder in Iberdrola, which owns 81.5% of the stock, (F) cost overruns for offshore wind projects,” he added.

Uber to Acquire Food Delivery App Postmates; Analysts Optimistic on Outlook

Uber Technologies Inc, an American multinational ride-hailing company, has announced that it will buy a food delivery company Postmates Inc in a $2.65 billion all-stock takeover, Bloomberg reported, citing people familiar with the matter.

The deal has been agreed by Uber’s board of directors and it could officially be declared by end of business today. However, Uber Eats head Pierre-Dimitri Gore-Coty will continue to run Uber’s combined delivery business, Bloomberg reported, citing an anonymous source.

The news comes after Uber failed to buy a food delivery app Grubhub in June, which was scooped up by Europe’s largest online food ordering service Just Eat Takeaway.com NV for $7.3 billion.

On Friday, Uber closed 0.82% higher at 30.68 after rising over 4% on initial reports of its bid for Postmates.

Uber Technologies outlook and price target

Thirty analysts forecast the average price in 12 months at $40.97 with a high of $52.00 and a low of $15.00. The average price target represents a 33.54% increase from the last price of $30.68, according to Tipranks. From those 30, 26 analysts rated ‘Buy’, three analysts rated ‘Hold’ and one rated ‘Sell’.

Last month, BTIG rated ‘Buy’ with a target price of $47 and Wedbush raised the target price to $47 from $38. In May, Citigroup raised price target to $41 from $34, BofA global research raised price objective to $42 from $40 and SunTrust Robinson raised target price to $50 from $42.

Also, RBC raised target price to $52 from $44 and D.A. Davidson updated to buy from neutral; raised target price to $39 from $23.50. Morgan Stanley target price is $47 with a high of $54 under a bull scenario and $19 under the worst-case scenario.

Analyst comment

“Uber is a truly global platform with multiple large addressable markets. We see a path forward for both ridesharing and Eats bookings growth, primarily driven by MAPC and frequency growth. We forecast fairly flat ridesharing ANR take rates (albeit on a growing gross bookings base) and significant growth in Eats ANR take rate, driven principally by order velocity and positive restaurant mix,” Brian Nowak, equity analyst at Morgan Stanley noted in May.

“Uber’s scale and liquidity give drivers higher earnings power and riders lower wait times. Uber’s platform approach allows it to rapidly expand into new business lines (Eats, Freight) and leverage shared expenses,” the analyst added.

Concerned on Parts of Tech Sector, But Sees Continued Growth Tied to Two Megatrends: Fidelity

The recent recovery in stock markets has been at odds with economists maintaining a gloomier global economic outlook. The rally is largely driven by the optimism of economic recovery and a much stronger recovery in the technology sector.

The S&P 500 information technology sector has returned about 10% in 2020, including reinvested dividends. Although during the tech bubble of 1990s the sector has never booked over 14% of the S&P 500’s earnings, its profit contribution surged to more than 20% of S&P 500 net income in recent years.

It is likely that technology will play a significant role across different countries and cultures in future, generating better returns in the long run for these tech companies.

“I remain concerned about the impact of recession on parts of the tech sector, but I see continued growth driven by 2 megatrends: the shift to digital experiences and the shift to cloud computing,” wrote Nidhi Gupta, information technology sector leader and portfolio manager of Fidelity Select Technology Portfolio.

Gupta said she believes in companies that are moving traditional offline experiences online, and firms that are helping these companies to make better business decisions with their data, Fidelity added.

Socialising online and doing some of the things, like watching a movie and shopping with friends, virtually is a long-term megatrend that is expected to remain for years, regardless of global economic conditions amid the COVID-19 crisis. That’s why companies like Netflix, Facebook, Amazon.com, and Latin American e-commerce provider MercadoLibre are favoured.

“A related megatrend is that digital businesses with this treasure trove of data are increasingly looking to cloud computing to draw data-driven insights to improve their businesses. This is happening, via cloud services being offered at all levels of the information technology stack—infrastructure, platform, and software,” the American multinational financial services corporation added.

“Many companies are shedding their hardware and becoming software-led in every way,” Gupta adds. Companies that provide the cloud services to help their customers make better business decisions, which include HubSpot, Microsoft, Salesforce.com, Elastic, and MongoDB – all overweighted fund positions as of May 31.

According to Tipranks’ analyst consensus by sector, 148 technology stocks out of 595 were rated “Strong Buy”, 306 were rated “Moderate Buy”, 122 were rated “Hold”, 19 were rated “Moderate Sell” while none were rated “Strong Sell”.

Fiat Chrysler Says Terms of PSA Merger Unchanged After Dividend Cut News

Fiat Chrysler Automobiles, an Italian-American multinational corporation, said the terms of its alliance with Europe’s second-largest car manufacturer Peugeot SA had not changed after Il Sole 24 Ore newspaper reported that it is considering ways to cut a planned 5.5 billion euro ($6.2 billion) of special dividend distribution to its shareholders.

Fiat Chrysler Automobiles confirmed that it would remain committed to the deal agreed with Peugeot SA in December last year. “The structure and terms of the merger are agreed and remain unchanged,” a spokesman for the Italian-American automaker told Reuters in an interview.

The world’s eighth-largest automaker has agreed to the conditions laid down for a state-backed 6.3 billion euro loan, including a promise not to relocate or cut jobs to weather the ongoing health crisis.

According to Reuters, Italian business newspaper Il Sole 24 Ore reported that Fiat Chrysler Automobiles could conserve cash by reducing the special dividend, possibly by handing shareholders assets as compensation.

Fiat Chrysler outlook and price target

Six analysts forecast the average price in 12 months at $9.94 with a high of $12.37 and a low of $6.75. The average price target represents a -0.10% decrease from the last price of $9.95, according to Tipranks.

From those six, three analysts rated ‘Buy’, two analysts rated ‘Hold’ and one rated ‘Sell’. HSBC raises target price to EUR 11.4 from EUR 11. Jefferies raises target price to EUR 9.50 from EUR 8.

Analyst comment

“We are reducing our 2020 US SAAR estimate to 15.5 million from 16.5 million due to the coronavirus demand shock. Our new Bull Case is 16.5mm with our Bear Case at 14.5mm. We make reductions to 2020 EPS for GM, F and FCA and the dealers accordingly,” Morgan Stanley noted in March.

“Our 2020 EPS falls to EUR 1.93 from EUR 2.85 previously. Of the EUR 0.92 decrease, about EUR 0.60 is a result of our 1mm unit SAAR forecast cut, where we have NAFTA shipments declining 8% Y/Y vs. our previous expectation of -2.5% Y/Y. Consistent with our forecasts for GM and Ford, the majority of the decrease vs. our previous expectation comes in Q2/Q3 where we now forecast NAFTA shipments down 12% and 8% Y/Y respectively vs. our previous expectations of -2% and 2%,” analyst added.

“Looking internationally, we forecast APAC shipments down 11.4% Y/Y with Q1 -30% / Q2 -14% / Q3 -8% with an uptick in Q4 of ~7%. Looking to EMEA, we forecast shipments down ~13% Y/Y vs. -2% previously, with the largest downward revision coming in Q2/Q3, where we are modelling shipments -20% and -12%, respectively. We have made no changes to mix or price in any region,” MS noted.

Exxon Mobil Suffers Quarterly Loss on Lower Oil and Gas Prices

Exxon Mobil Corporation, an American multinational oil and gas entity headquartered in Texas, said that it has incurred an unprecedented second straight quarterly loss from the fall in oil and natural gas prices after coronavirus lockdown restrictions dampened energy demand worldwide, the company said in its regulatory filing.

The oil and natural gas explorer took a hit as those commodities plunged this year. The unit’s operating profit dropped by between $2.5 billion and $3.1 billion, the company said. Refining business witnessed a contraction by nearly $1 billion. According to Cowen & Company, Exxon will register a per-share loss of 69 cents at the midpoint, worse than Bloomberg’s survey forecast of 55 cents.

Exxon faces a loss of $2.3 billion in the second quarter, or 57 cents per share, according to estimates from Refinitiv IBES, reported by Reuters. Second-quarter earnings result is expected to be published on July 31.

Crude oil has fallen over 30% since the start of the year as the coronavirus pandemic shattered global demand and a glut forced lower production in oil-producing countries.

Exxon outlook and price target

Thirteen analysts forecast the average price in 12 months at $49.80 with a high of $80.00 and a low of $34.00. The average price target represents a 12.98% increase from the last price of $44.08, according to Tipranks. From those 13, one analyst rated ‘Buy’, ten analysts rated ‘Hold’ and two rated ‘Sell’.

BofA global research lowered price objective to $77 from $80, UBS raised target price to $50 from $48, Goldman Sachs raised price target to $44 from $41 and JP Morgan raised target price to $51 from $44. Morgan Stanley target price is $44 with a high of $85 under a bull scenario and $23 under the worst-case scenario.

Analyst comment

“Attractive investment opportunities, but above average execution risk. XOM’s $30-$35 B in annual capex through 2025 supports growth projects in Guyana, Brazil, Permian, PNG LNG, and Mozambique and expands refining & chemicals capacity. Execution risk remains an overhang for now, though could drive long-term upside if successful,” noted Devin McDermott, equity analyst at Morgan Stanley.

“Growth targets appear hard to achieve.  XOM sees the potential to double earnings by 2025, though that assumes downstream & chemicals margins recover off the lows experienced in 2019 (and so far in 2020) to the 5-year average. Higher spending and more exposure than peers to current downstream & chemicals margin weakness leads to lower FCF yield,” he added.

Tesla Beats Q2 Vehicle Deliveries; Shares Soar 8%

Tesla Inc, an American electric vehicle and clean energy company based in California, has exceeded analysts’ projection of vehicle deliveries in the second quarter, defying a trend of falling sales amid the ongoing coronavirus pandemic lockdown, sending the shares of the electric carmaker up over 8%.

In the second quarter, Tesla manufactured more than 82,000 vehicles and delivered approximately 90,650 vehicles. It delivered 80,050 units of its new Model Y vehicles and Model 3.

“While our main factory in Fremont was shut down for much of the quarter, we have successfully ramped production back to prior levels. Our net income and cash flow results will be announced along with the rest of our financial performance when we announce Q2 earnings. Our delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct,” Tesla said in the statement.

Final numbers could vary by up to 0.5% or more. Tesla vehicle deliveries represent only one measure of the company’s financial performance and should not be relied on as an indicator of quarterly financial results, which depend on a variety of factors, including the cost of sales, foreign exchange movements and mix of directly leased vehicles, the electric car maker added.

Following this announcement, Tesla shares surged more than 8% by about $85 in early trading to $1,208.

Tesla outlook and price target

Twenty-six analysts forecast the average price in 12 months at $805.85 with a high of $2,000.00 and a low of $275.00. The average price target represents a -33.46% decrease from the last price of $1,210.99, according to Tipranks. From those 26, eight analysts rated ‘Buy’, nine analysts rated ‘Hold’ and nine rated ‘Sell’.

Wedbush raised the target price to $1,250 from $1,000 with a high of $2000 under a bull scenario. UBS raised the target price to $800 from $420. Morgan Stanley target price is $650 with a high of $1200 under a bull scenario and $190 under the worst-case scenario.

Analyst comment

“We note that 2Q would have benefitted by factors such as pent-up demand for the Model Y, the early China ramp, and relatively ample inventory levels to begin the quarter, but one must also consider their biggest factory (Fremont) was totally shut for the better part of 2 months and all the related distribution disruption related to COVID-19. While still a stretch, some investors are beginning to ask us if Tesla could see positive earnings revisions taking forecasts to levels even higher than pre-COVID. Imagine that,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Using this delivery number in place of our prior Q2 delivery estimate, this would bring our full-year forecast to ~433k, which compares to current consensus in the range of 400-420k. We would expect consensus expectations to rise meaningfully, potentially back toward Tesla’s initial 2020 guidance to “comfortably exceed” 500k units. Right now, we see deliveries meaningfully above 500k as more of a bull case. We now see 400k deliveries as more of a bear case than a base case,” he added.

McDonald’s Halts Reopening U.S. Restaurants for 21 Days; Analysts Optimistic on Outlook

McDonald’s Corporation, one of the world’s largest American fast-food chain, has announced to halt reopening of its U.S. restaurants for 21 days as coronavirus cases spiked to nearly 3 million with over 1.2 lakhs deaths.

The largest restaurant chain in the world witnessed over 25% fall in sales worldwide in April and May as shutting down dining rooms due to COVID-19 pandemic hurt the restaurant industry. On Wednesday, fresh coronavirus cases in the U.S. spiked by around 50,000, marking the biggest one-day jump since the pandemic began.

“Our resiliency will be tested again. COVID-19 cases are on the rise – with a 65% increase in infections over the last two weeks,” Joe Erlinger, McDonald’s U.S. president and Mark Salebra, head of the National Franchisee Leadership Alliance said in a letter seen by Reuters.

McDonald’s outlook and price target

Twenty-seven analysts forecast the average price in 12 months at $208.04 with a high forecast of $245.00 and a low forecast of $170.00. The average price target represents a 12.66% increase from the last price of $184.66, according to Tipranks. From those 27, 20 analysts rated ‘Buy’, seven analysts rated ‘Hold’ and none rated ‘Sell’.

BMO raised the target price to $220 from $215, Suntrust Robinson raised the target price to $208 from $195, Jefferies raised it to $220 from $208. Cowen and Company raised it to $210 from $208, Piper Sandler raised the target price to $190 from $170 and Stifel raised it to $182 from $175. Morgan Stanley target price is $200 with a high of $246 under a bull scenario and $134 under the worst-case scenario.

Analyst comment

“Best-in-class asset quality, scale in advertising, other areas = structural advantages. Experience of Future (EOTF) reimages enable digital and delivery sales. MCD spends materially more on reimaging than average peers. ROIC rising, capex to fall, and FCF and return of capital to accelerate post ’19, after accounting for Covid-19 disruption,” noted John Glass, equity analyst at Morgan Stanley.

“Refranchising to 95% mostly complete, with operating margins in the mid-40% range, improved FCF and lower earnings volatility. Defensive stock, both in terms of fundamentals and low stock price volatility; better positioned for uncertain demand environment,” he added.

Macy’s Sales Slump Over 40% in Q1; Doesn’t Anticipate Another Full Shutdown

Macy’s Inc, an American department store chain founded by Xavier Warren in 1929, posted a $3.58 billion loss as the coronavirus-induced lockdown hit its first-quarter sales, leading to a record $3 billion impairment charge.

The fashion retailer, who also owns Bloomingdale’s reported that first-quarter sales through May 2 almost halved to $3.02 billion. Additionally, it reported a net loss of $11.53 per share, compared with a profit of 44 cents a year ago.

However, the company expects Q2 comparable sales to improve by nearly 6-7 percentage points, as against a 35% fall in the prior quarter, Macy’s said. The company reported $1.52 billion in net cash and cash equivalents, combined with $18.58 billion in total liabilities and shareholders’ equity.

“The first quarter of 2020 was challenging for the country, the industry and Macy’s, Inc. While our stores are re-opened, we expect that the COVID-19 pandemic will continue to impact the country for the remainder of the year. We do not anticipate another full shutdown, but we are staying flexible and are prepared to address increases in cases on a regional level,” Jeff Gennette, chairman and chief executive officer of Macy’s, Inc said in a press release.

“We are meeting our customers how and where they are shopping and have enhanced our fulfilment options and health precautions to ensure a safe and welcoming shopping experience. While we continue to see challenges ahead, we’ve taken the necessary actions to stabilize our business and give us financial flexibility. We are confident we have the right strategy and plans in place to navigate the shifting retail landscape,” he added.

Following this announcement, Macy’s shares fell over 3% in premarket trading.

Macy’s Inc outlook and price target

Eight analysts forecast the average price in 12 months at $5.64 with a high forecast of $9.00 and a low forecast of $3.00. The average price target represents a -19.54% decrease from the last price of $7.01, according to Tipranks. From those eight, nice rated ‘Buy’, three analysts rated ‘Hold’ and five rated ‘Sell’.

Cowen and Company raised target price to $9 from $7 and Credit Suisse raised price target to $6 from $4.5. Morgan Stanley target price is $6 with a high of $19 under a bull scenario and $1 under the worst-case scenario.

Analyst comment

“Macy’s continues to undergo core operating challenges, similar to peers in the department store space. Despite closing stores proactively, store-only comps remain negative and we forecast them to remain so in the future, eroding ROIC,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“Expense cuts, real estate monetization, and secondary growth initiatives are encouraging, but are unlikely to stimulate enough cash flow to reinstate its dividend while also covering upcoming debt maturities. In the event of a 2020 recession, Macy’s likely struggles to survive as it is currently operating,” he added.

FedEx Q4 Result Beats Expectations; Shares Soar About 10%

FedEx Corporation, an American multinational delivery services company headquartered in Tennessee, has reported better-than-expected fourth-quarter revenue and profit as demand for contactless home deliveries surged amid COVID-19 pandemic, sending shares of the leading delivery services company up about 10%.

Adjusted profit at Tennessee-based delivery services company slumped by nearly 50% to $663 million, or $2.53 per share. FedEx revenue for the fourth quarter dipped to $17.4 billion from $17.8 billion recorded a year ago. That beat the average forecast of $1.42 per share by analysts surveyed by Zacks Investment Research.

FedEx Ground’s revenue increased 20% but its operating income fell about 17% in the fourth quarter. Revenue for FedEx Express dipped 10% and operating income slumped over 50%.

FedEx said that all revenue and expense line items were affected by the COVID-19 pandemic during the quarter. While commercial volumes were down significantly due to business closures across the globe, there were surges in residential deliveries at FedEx Ground and in transpacific and charter flights at FedEx Express, which required incremental costs to serve.

“Though our fiscal fourth-quarter performance was severely affected by the COVID-19 pandemic, I am extremely proud of the herculean efforts of our team members,” Frederick W. Smith, FedEx Corp. chairman and CEO said in a press release.

“With safety as the first priority, these men and women provided essential transportation of critical supplies across the globe and delivered peak-level e-commerce volumes in the United States. As a result of the strategic investments we have made to enhance our capabilities and efficiencies, FedEx is well-positioned to support and benefit from the reopening of the global economy.”
The delivery company did not provide earnings forecast for fiscal year 2021 as the timing and pace of an economic recovery are uncertain.

Following the results report, FedEx share jumped about 10% in after-market trading. However, that is below its record high of $250 seen in October 2017.

FedEx outlook and price target

Fifteen analysts forecast the average price in 12 months at $143.36 with a high of $160.00 and a low of $98.00. The average price target represents a 2.24% increase from Tuesday’s price of $140.22, according to Tipranks. From that 15, six analysts rated ‘Buy’, nine rated ‘Hold’ and none rated ‘Sell’.

Cowen and Company raised target price to $167 from $156, UBS raised price target to $158 from $135, JP Morgan raised target price to $145 from $115, Credit Suisse raised price target to $150 from $121 and Citigroup raised price target to $160 from $140. Morgan Stanley target price is $98 with a high of $153 under a bull scenario and $54 under the worst-case scenario.

Analyst comment

“We see secular competitive risks to Parcels from a triple threat of (1) Insourcing by e-commerce giants, (2) Omnichannel shift enabling last-mile competition from mid-size retailers, and (3) Platformization of small-shipper volumes. Together, these trends could erode returns in the B2C space, which has been a major driver of growth for the legacy Parcels in recent years,” noted Ravi Shanker, equity analyst at Morgan Stanley.

“We see FDX as relatively better positioned than UPS due to its smaller eCommerce exposure, lack of AMZN business and unionization, an outsourced Ground operation, and potentially more self-help opportunities. In addition to the secular risks, tough macro conditions and execution are likely to keep earnings under pressure,” he added.

Conagra Brands Forecast 13% jump in Q1 Organic Sales; Shares Jump 6%

Conagra Brands Inc, an American packaged foods company headquartered in Chicago, said that it predicts more than 10% rise in organic net sales this quarter after the company beat Q4 revenue projections on solid demand for frozen foods and snacks amid coronavirus-led lockdowns, sending shares of the processed and packaged foods maker up 6%.

The company’s fourth-quarter net sales increased 25.8%; organic net sales increased by 21.5%, with double-digit growth in each of the Company’s three retail segments. Fiscal 2020 net sales increased by 15.9%, and organic net sales increased 5.6%, the company said.

Diluted earnings per share from continuing operations (EPS) for the fourth quarter grew 57.7% to $0.41, and adjusted EPS more than doubled to $0.75. EPS for fiscal 2020 grew 12.4% to $1.72, and adjusted EPS grew 13.4% to $2.28. The Company projected first-quarter fiscal 2021 of organic net sales growth in the range of 10% to 13%, adjusted operating margin in the range of 17.0% to 17.5%, and adjusted EPS in the range of $0.54 to $0.59.

Following this announcement, Conagra Brands shares climbed 6% premarket after earnings beat past estimates.

Although several U.S. states have started to ease lockdowns, the demand for packaged foods remains high in the current quarter, since consumers prefer to cook by themselves rather than venturing out as fears of coronavirus remain high.

Sean Connolly, president and chief executive officer of Conagra Brands, said in a press release, “Our business clearly benefited from increased at-home eating in the fourth quarter, as the elevated retail demand outweighed the reduced foodservice demand. In retail, many consumers tried our modernized products for the first time and then returned for more.”

“While we are optimistic about the long-term implications of recent consumer behaviour shifts, given COVID-19 uncertainties, we are only providing guidance for the first quarter of fiscal 2021. We intend to provide an update on our fiscal 2021 outlook next quarter,” he added.

Conagra Brands outlook and price target

Ten analysts forecast the average price in 12 months at $36.00 with a high of $41.00 and a low of $32.00. The average price target represents a 6.82% increase from the last price of $33.70, according to Tipranks. From that ten, four analysts rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley target price is $32 with a high of $44 under a bull scenario and $22 under the worst-case scenario. JP Morgan raised price target to $39 from $34 and Deutsche Bank raised the target price to $32 from $31. On the technical chat, 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst comment

“Exposure to frozen, opportunity to turnaround the refrigerated business, and snacking growth should sustain LSD org sales growth,” wrote Pamela Kaufman, equity analyst at Morgan Stanley in his last month’s note.

“We see solid HSD EPS growth but limited potential for mid-term target upside: Opportunity to close gross margin gap vs peers but see downside risk if topline/synergy estimates fall short of optimistic F22 targets,” she added.

Facebook’s Advertiser Diversification to Cushion Boycott Impact; Buy on Weakness: Morgan Stanley

Aiming to pressurize Facebook, an American social media conglomerate corporation based in California, to crack down on fake news and hate speech has prompted several corporate advertisers to pull out their advertising from the biggest social media site platform.

Over the past week, several companies, including Unilever, Starbucks, Coca-Cola, Honda and others, have signed for an advertising boycott of social media platforms including Facebook and Twitter.

Ben & Jerry’s, Verizon Wireless and Eddie Bauer have also joined the race to pause advertisements for July. Following this, Facebook’s shares plunged over 10% from high of $245.18 on June 23.

Morgan Stanley: “We’d buy on weakness”

“Key points that could minimize any material Facebook impact: In our view, it is important to remember that 1) Facebook’s advertising dollar base is highly diversified, as on its 1Q 2019 earnings call, the company said that ‘our top 100 advertisers represented less than 20% of our total ad revenue. “Facebook’s advertiser base likely has grown by more than 10% since then, meaning their ad base could be even more diversified. 2) Facebook has an incredibly strong direct-response transaction-driven ad product most recently seen in 1Q results that DR advertisers will step in and bid with if/when pricing drops. The ability for DR advertisers to spend more is likely very strong right now given the current macro strength in e-commerce,” said Brian Nowak, equity analyst at Morgan Stanley in a note to clients.

“While the current boycott cancellations don’t look troubling, uncertainty around the breadth and duration of this boycott could create tactical pressure on Facebook. We intend to lean on the above math as our proxy as we try to gauge the impact on Facebook’s ad business…and are buyers on weakness when near-term sentiment on this scaling platform becomes overly bearish and valuation gets depressed.”

Brian Nowak, equity analyst at Morgan Stanley further wrote that “we are positive on Facebook’s monetization roll-out of Instagram as well as Facebook’s ability to continue to innovate and improve its monetization. Combined with high and growing engagement we see monetization upside going forward. We see the monetization of Instagram adding $4 billion of incremental ad revenue in 2021.”

“Investing from a position of strength to drive faster long-term growth: We are modelling 11% GAAP opex (excluding one-time items) growth in 2020, implying an incremental $5 billion in opex. Our base case model implies opex per employee moderates in ’20 while Facebook hiring remains roughly flat on an absolute basis. We believe Facebook will grow EPS at a 14% CAGR (2019-2022),” Morgan Stanley’s Nowak added.

Facebook target price

Morgan Stanley target price is $230 with a high of $280 under a bull scenario and $160 under the worst-case scenario. Thirty-two analysts forecast the average price in 12 months at $248.21 with a high of $300.00 and a low of $185.00. The average price target represents a 12.50% increase from Monday’s price of $220.64, according to Tipranks. From those 32, 29 analysts rated ‘Buy’, three rated ‘Hold’ and none rated ‘Sell’.

Coty to Acquire 20% Stake in Kim Kardashian West; Shares Jump Over 12%

Coty Inc, an American multinational beauty company, has announced that it will acquire 20% stake in Kim Kardashian West’s beauty business worth $200 million, sending shares of the cosmetics maker up over 12%.

The value of the deal is about $1 billion, as first reported by the FT, which is just below the $1.2 billion Coty put on West’s younger sister Kylie Jenner’s business when it acquired a 51% stake in January.

The cosmetics maker is saddled with billions of dollars of debt following slow sales due to salon closures worldwide amid coronavirus crisis. In order to ease some burden, the company has offloaded a majority stake in its hair and nail care business for $3 billion in May.

The acquisition is expected to close in the third quarter of FY21. All the business’ products will be sold through leading luxury beauty retailers as well as owned digital channels. After the announcement, Coty shares gained over 12% to $4.70 in pre-market New York trading on Monday.

Coty outlook and price target

Seven analysts forecast the average price in 12 months at $6.00 with a high of $8.00 and a low of $5.00. The average price target represents a 43.54% increase from the last price of $4.18, according to Tipranks. From those seven, one analyst rated ‘Buy’, six rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley target price is $6 with a high of $10 under a bull scenario and $2 under the worst-case scenario. Coty Inc has received a consensus rating of “Hold” from the sixteen rating firms that are currently covering the stock, as per MarketBeat Rating report.

The average yearly target among equity analysts were $8.58. Stifel cuts price target to $6 from $7. Last month, Jefferies lowered its price target to $5 from $5.50, Citigroup cuts price target to $3.1 from $4 and Deutsche Bank cuts target price to $6 from $8. On the other hand, 50-day Moving Average and 100-200-day MACD Oscillator signals a strong selling opportunity.

Analyst comment

“We remain Equal-weight on Coty with weak underlying fundamentals reflected in valuation,” wrote Dara Mohsenian, equity analyst at Morgan Stanley in his last month’s note.

“Long-term, we expect a gradual improvement to slight Coty organic sales growth, well below peers, after a severe near-term COVID-19 impact. COTY trades at a valuation discount to more attractive beauty peers, which we believe properly reflects COTY’s suboptimal beauty positioning, near-term execution risk, low earnings visibility, and high net debt/LTM EBITDA leverage,” he added.

Amazon.com Announces to Buy Autonomous Driving Startup Zoox

Amazon.com, an American multinational technology company based in Seattle, has announced that it will acquire an autonomous vehicle company Zoox Inc in a deal worth reported to be over a billion dollars, helping in bringing their vision of autonomous ride-hailing to reality.

One of the Big Four technology company, Amazon, has extended its investment in the automobile sector, raising more than $530 million in a funding push for Aurora Innovation last year. However, both the companies did not completely disclose the deal and financial terms; the world’s largest online retailer has acknowledged to pay more than $1 billion to Zoox, a source told The Wall Street Journal.

“Zoox is working to imagine, invent, and design a world-class autonomous ride-hailing experience,” Jeff Wilke, Amazon’s CEO said in a statement. “Like Amazon, Zoox is passionate about innovation and about its customers, and we’re excited to help the talented Zoox team to bring their vision to reality in the years ahead.”

“This acquisition solidifies Zoox’s impact on the autonomous driving industry,” Aicha Evans, CEO of Zoox said in a statement. “We have made great strides with our purpose-built approach to safe, autonomous mobility, and our exceptionally talented team working every day to realize that vision. We now have an even greater opportunity to realize a fully autonomous future.”

However, completion of this transaction is subject to customary closing conditions.

Amazon.com outlook and price target

Forty-two analysts forecast the average price in 12 months at $2,790.75 with a high of $3,400.00 and a low of $1,987.00. The average price target represents a 3.63% increase from Friday’s close of $2,692.87, according to Tipranks. From that 42, 39 analysts rated ‘Buy’, two rated ‘Hold’ and one rated ‘Sell’.

Morgan Stanley target price is $2,800 with a high of $3,300 under a bull scenario and $1,600 under the worst-case scenario. Last week, Suntrust Robinson raised the target price to $3,400 from $2,700, Deutsche Bank raised the target price to $3333 from $2750 and Wedbush raised the target price to $3,050 from $2,750.

It is good to buy at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

Analyst comment

“Amazon’s high-margin businesses continue to allow Amazon to drive greater profitability while still continuing to invest. Amazon Prime membership growth drives recurring revenue and positive mix shift. Advertising serves as a key area for both further growth potential and profitability flow-through.,” wrote Brian Nowak, equity analyst at Morgan Stanley in his June 1 note.

“E-commerce is inflecting and our “shifting consumer spend” framework shows why we expect faster forward growth even if the consumer weakens. We raise estimates, now modeling 25% or 12% e-com growth in ’20/’21. We raise AMZN ests (top OW pick), remain OW WMT, and highlight e-com tailwinds to OW FB/GOOGL,” he added.

‘2020 Lows Are in, Repeat of The Great Depression Seems Unlikely’: Fidelity’s Timmer

The S&P 500 index has gained around 40% since hitting a three-year low on March 23, spurred by the Federal Reserve’s massive stimulus. The year is already halfway through and now it rests with the stock market to prove that it was right about a sharp V-shaped rebound in economic growth.

Empirically, big price gains, combined with a large retracement after a fall amid strength in market broadness – a trend that can be seen in the S&P 500 today, has always led to a start of a bull market.

There is rising speculation among investors that the recent uptrend in stocks is just a bear market rally. Jurrien Timmer, director of global macro in Fidelity’s Global Asset Allocation Division writes “Yes, but it’s not likely.”

2020 lows are in

Jurrien Timmer, director of global macro in Fidelity’s Global Asset Allocation Division wrote that 1929 and 1937 serve as a warning that there is nothing in the charts currently – in terms of price and breadth – that guarantees that the present rally is not a bull trap on the way to new lows. He added that since the 1930s, the current setup has always been a new bull market. But the market is a nonlinear dynamic system, not a static one (like a coin toss would be), so we can’t get too complacent.

“Having said that, for the record, I do think the lows are in and I do not think this is another 1929 or 1937. Part of what makes the system dynamic instead of static is the policy response, and today’s monetary (and fiscal) policy could not be more different than the policies 90 years ago,” wrote Fidelity’s Timmer.

Fed policy during the Great Depression vs 2020

Jurrien Timmer, director of global macro in Fidelity’s Global Asset Allocation Division wrote that the crash of 1929 was part of a massive deflationary spiral, and while the Fed did cut rates, it was nowhere near enough to offset the collapse in prices. As a result, while the market was falling 86%, the inflation-adjusted Fed policy rate soared to 16%.

Then, in April 1933, the United States government finally reflated by devaluing the dollar. It did so first by confiscating everyone’s physical gold and then increasing its price from $20 to $35. That was a one-time devaluation of 43% during the gold standard. That reflationary policy response probably helped the market recover, but by April 1933 the damage was already done: The stock market had lost most of its value (86%) in 1932, almost a year earlier. Too little too late, he added.

Jurrien Timmer, director of global macro in Fidelity’s Global Asset Allocation Division further wrote that “fast forward to 2020: This time we are seeing the polar opposite. The real Fed policy rate, adjusted for inflation, and considering the effects of quantitative easing (QE), was already negative to begin with since the global financial crisis (GFC). It has now become vastly more so, with the Fed adding some $3 trillion to its balance sheet in the span of only a few months. Therefore, it’s difficult for me to see the market going down the same path as the 1930s.”

“Having said that, this doesn’t necessarily mean that the market will just keep advancing from here. Unless the earnings estimate for 2022 are too low, I believe the market has probably already priced in too much recovery. But, in my view, the Fed has done an effective job at putting a floor under financial assets by removing the left tail. It couldn’t be a starker contrast to the 1930s markets,” wrote Fidelity’s Timmer.

Fidelity’s Timmer concludes

“I am sticking with my thesis that the lows are in, but that the market is not a layup from here. While a repeat of the Great Depression seems unlikely, it is good to at least be aware that the strength of the rally so far does not guarantee a continued bullish outcome.”

PG&E Raises Over $5 Billion in Shares, Equity Unit Offering to Avoid Bankruptcy

PG&E Corporation, an energy-based holding company headquartered in San Francisco, has announced on Friday that it has raised around $5.5 billion from shares and equity unit offering as the company prepares for life to avoid the largest utility bankruptcy in U.S. history in July.

The California power giant said that it sold over 423 million shares at $9.50 to raise nearly $4 billion. The offerings are part of PG&E’s plan to fund its emergence from Chapter 11, subject to market conditions. The offerings are currently expected to close on July 1, 2020, subject to the satisfaction of customary closing conditions, the company said in the statement.

This fund-raising happened days after PG&E Corporation said its Chapter 11 reorganization plan has been confirmed by the United States Bankruptcy Court.

Goldman Sachs & Co. LLC and J.P. Morgan are acting as joint lead book-running managers for both the common stock offering and the equity units offering. Barclays, Citigroup and BofA Securities are also acting as joint book-running managers for both the common stock offering and the equity units offering.

PG&E outlook and price target

Ten analysts forecast the average price in 12 months at $14.61 with a high of $17.00 and a low of $13.00. The average price target represents a 50.15% increase from the last price of $9.73, according to Tipranks. From that 10, six analysts rated ‘Buy’, four rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley target price is $13 with a high of $21 under a bull scenario and $1 under the worst-case scenario. Earlier this month, Mizuho raised the target price to $14.50 from $13.50, RBC cut target price to $15 from $19 and Wells Fargo raises price target to $13 from $12.

On the other hand, it is good to sell at the current level as 50-day Moving Average and 50-150-day MACD Oscillator signals a selling opportunity.

Analyst comment

“Plan of emergence from Chapter 11 is not yet finalized so we see heightened uncertainty. Very high fire risk,” wrote Stephen Byrd, equity analyst at Morgan Stanley in his June 9 note.

“Our AlphaWise analysis indicated that PCG has >$200b of property value in very high fire-threat areas. Utility-caused wildfires present (a) significant risk to equity value. Highly levered to market multiples since exit financing incorporates significant equity,” he added.

Nike Reports Surprise Loss in Q4 as Sales Fall 38%; Analysts Optimistic on Outlook

Nike Inc, an American sportswear company headquartered in Beaverton, reported a surprise quarterly loss for the first time in more than two years in the last quarter of the fiscal year 2020 as lockdowns imposed worldwide to halt the spread of the deadly coronavirus have caused crippling damage.

The world’s leading designer, marketeer, and distributor of authentic athletic footwear, Nike’s fourth-quarter revenue plunged about 40% to $6.3 billion with a net loss in at 51 cents per share, declining from the prior year as the majority of NIKE-owned and partner stores in North America, EMEA and APLA were closed due to the COVID-19 pandemic, the company said in a statement.

However, digital sales increased 75% in the last quarter, with strong double-digit increases across all geographies and was approximately 30% of total revenue. For the fiscal year, Greater China revenues increased 8%, marking its sixth consecutive year of double-digit currency-neutral growth despite the headwinds from COVID-19 in the second half of the year.

The coronavirus outbreak has impacted businesses worldwide, leading nearly 50% fall in shipments to wholesale customers, resulting in lower total revenue and higher inventory. Gross margin plunged 820 basis points to 37.3% and net loss was $790 million.

“In a highly dynamic environment, the NIKE Brand continues to resonate strongly with consumers all over the world as our digital business accelerates in every market,” John Donahoe, president and chief executive officer at Nike said.

“We are uniquely positioned to grow, and now is the time to build on NIKE’s strengths and distinct capabilities. We are continuing to invest in our biggest opportunities, including a more connected digital marketplace, to extend our leadership and fuel long-term growth.”

Following this announcement, shares of the footwear maker dipped over 3% after closing 1.3% higher at 101.40 on Thursday.

Equity analyst comment

“Robust 4Q20 digital results and management’s commitment to an accelerated digital transformation leave us bullish on NIKE’s long-term prospects. NIKE continues to represent one of few companies likely to benefit in a post-COVID-19 world. Stay OW; estimates under review,” said Kimberly Greenberger, equity analyst at Morgan Stanley.

“Acceleration confirms the core tenets of our bull thesis, leaving us confident NIKE will be one of few companies to generate longer-term revenue and margin benefits post-COVID-19. In our view, the market understands the short-term COVID-19 impact on 2021e results, and investors will instead focus on NIKE’s longer-term opportunity in a post-COVID-19 world. We stay OW; estimates under review,” she added.

Nike outlook and price target

Twenty-two analysts forecast the average price in 12 months at $107.95 with a high of $130.00 and a low of $83.00. The average price target represents a 6.46% increase from the Thursday’s price of $101.40, according to Tipranks. From that 22, 18 analysts rated ‘Buy’, four rated ‘Hold’ and none rated ‘Sell’.

Morgan Stanley target price is $119. Nike had its price objective boosted by Credit Suisse to $111 from $114, UBS raised the target price to $122 from $114 and JP Morgan raised to $104 from $91. Jefferies raised it to $95 from $83, Needham raised to $113 from $80, BTIG raised target price to $117 from $108.

However, Cowen and Company cut the target price to $107 from $110. It is good to buy at the current level as 50-day Moving Average and 50-200-day MACD Oscillator signals a strong buying opportunity.

Ford Motor Join Hands With Vodafone for 5G Network in The UK

Ford Motor Company, an American multinational automaker that has its main headquarters in Michigan, has signed a deal with Vodafone Group Plc to install a fifth-generation technology network at its electrified powertrain facility in Essex, both the companies said in a joint statement on Thursday.

This will be the part of a 65-million-pounds or around 80-million-dollar investment in the fifth-generation technology network (5G) supported by the British government. This deal will replace current Wi-Fi networks to quicken the production of electric vehicles.

Chris White, Ford’s 5GEM project lead said: “Connecting today’s shop floor requires significant time and investment. Present technology can be the limiting factor in reconfiguring and deploying next-gen manufacturing systems. 5G presents the opportunity to transform the speed of launch and flexibility of present manufacturing facilities, moving us towards tomorrow’s plants connected to remote expert support and artificial intelligence.”

Vinod Kumar, CEO of Vodafone Business, said: “5G mobile private networks act as a springboard for organisations, allowing them to rethink the way they do business. In this case, MPN technology makes the factory of the future possible. It allows machines and computing power to coordinate in real-time, improving precision, efficiency and safety. We’re excited to help Ford plan for the future of its business.”

Ford outlook and price target

Eleven analysts forecast the average price in 12 months at $6.19 with a high forecast of $8.00 and a low forecast of $3.50. The average price target represents a 4.03% increase from the last price of $5.95, according to Tipranks. From that eleven, three analysts rated ‘Buy’, six rated ‘Hold’ and two rated ‘Sell’.

Morgan Stanley raised price target to $8 from $7. Ford Motor was given a $7.50 price target by analysts at Jefferies Financial Group Inc. The firm currently has a buy rating on the stock. JP Morgan raises target price to $7 from $6. Goldman Sachs raises target price to $7. Evercore ISI raises price target to $5 from $3.5.

On the other hand, it is good to sell at the current level as 50-day Moving Average and 100-200-day MACD Oscillator signals a strong selling opportunity.

Analysts’ comments

“We have marked-to-market our Ford earnings assumptions to account for what we expect to be a surprising level of pricing and mix for the remainder of 2020, driving an early EPS upgrade and our target to $8. Reiterate Overweight,” noted Adam Jonas, equity analyst at Morgan Stanley.

“Longer term, we remain extremely focused on the VW partnership, as we view this evolving relationship as arguably the #1 driver of Ford’s ability to improve efficiency, reduce waste and successfully pivot from ICE to EV. While investors may not see deep significance here, we believe these three areas are defining vectors of innovation and competitive strength as the industry transitions to Auto 2.0 and can make the difference between Ford having a cost of capital of greater than 20% or <10%,” he added.

John Butters, senior earnings analyst at FactSet in his June 19 note wrote, “despite the decline in expected earnings, this sector has witnessed the second-largest increase in price (+31.7%) of all eleven sectors since March 31.”

“However, Ford Motor (to -$1.25 from -$0.31), Amazon.com (to $1.39 from $6.14), General Motors, and Carnival have been the largest contributors to the decrease in expected earnings for this sector since March 31.”